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Nevada Faces Broken Pot Supply Chain

Nevada became one of several states last year to officially legalize recreational marijuana. And, over the weekend of July 1, the gates finally opened to the masses. Unfortunately, the masses were bigger than anticipated, and now the state is facing the threat of a pot supply shortage.

Within the first two weeks of legal sales, most of the 47 licensed dispensaries across the state began running out of product, from popular strains to edibles and vape pens. This led Governor Brian Sandoval to declare a state of emergency, forcing officials to come up with a plan to fix the supply chain. If not, the state could risk losing thousands of dollars in tax revenue. State legislators held the first emergency session on Thursday to begin solving the problem.
Sales Expectations vs. Reality

Within the first four days of the program’s launch, the state recorded $3 million in sales revenue and $500,000 in tax revenue. These figures have far exceeded the expectations of many officials and dispensaries alike. Al Fasano, cofounder and COO of Las Vegas dispensary ReLeaf, told reporters, “We didn’t know the demand would be this intense. All of a sudden you have like a thousand people at the door.…We have to tell people we’re limited in our products.”

One of the main reasons this shortage has become such a pressing problem is not because of the strain it will put on consumers, but because of the potentially lost tax revenue. The state implemented a 10 percent sales tax on recreational sales and a 15 percent tax for growers, expecting to generate tens of millions of dollars. These dollars would then be allocated to educational and research funds in the states.

Therefore, a freeze on sales would severely cut these funds and likely delay any new programs in the works.

Common Problem for Legalized States

This shortage is apparently not an atypical problem for states legalizing recreational pot.

Officials and marijuana business owners in Colorado reported that they were very unprepared for the high demand after legalization took effect. Colorado sold approximately $300 million worth of product in 2014, the first full year of legal recreational sales. The state confronted possible supply shortages several times, due to the length of the cultivation period and sales beginning before enough new product had been grown.

Limited Distributors

This hasn’t quite been the problem for Nevada, though. Plenty of weed has been grown, there just hasn’t been anyone legally permitted to transport it to the dispensaries.

When the ballot passed back in November, the legislation stipulated that only wholesale alcohol distributors would be allowed to obtain licenses to distribute marijuana for the first 18 months of sales. However, before Wednesday, no distributors met the qualifications to obtain a license. This meant that whatever stores had in stock was all they could sell for two weeks.

Now, one distributor has been approved to start transporting new product to dispensaries around the state. Blackbird Logistics Corporation obtained the necessary liquor license in order to be approved and plans to begin shipping product immediately.

Officials are currently deliberating on whether to issue more distribution licenses to non-alcohol companies in order to keep the supply chain functional and consumer demand fulfilled. They are expected to reach a decision soon.

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